Rhys Jones
Reuters
LONDON: British Airways Plc. fell to a worse-than-expected first-half loss and forecast annual revenues 1 billion pounds lower than last year, but said traffic volumes and yields had stabilized. The airline, whose alliance with American Airlines and Spain’s Iberia is being scrutinized by European and US competition watchdogs, on Friday reported a pretax loss of $482.4 million for the six months to end September, while revenues fell 13.7 percent to $6.8 billion.
BA’s pretax loss – impacted by higher debt levels, lower interest rates, a higher pension burden and restructuring costs of $79.5 million – compares to the pretax profit of $86.2 million it made in the same period last year. The airline is set for a loss of between $389.6 million $422.7 million, said a Reuters poll of six analysts.
The airline said it would look to drive more costs out of the business in the coming months.
“Our revenues are likely to be about [$1.6 billion] lower this year so we’re determined to reduce costs further,” chief executive Willie Walsh told reporters on a conference call.
He added that the airline was “riding along the bottom” of the downturn.
The global recession has battered the airline industry as consumers cut back on trips abroad and lucrative business-class travelers fly less. BA has also been hit by growing competition from low-cost carriers and potential labor strikes.
The International Air Transport Association recently said it still expected airlines to lose $11 billion this year.
Walsh also said he was “confident in the strength” of BA’s case to win US Department of Transportation approval for a sales tie-up with American Airlines and Iberia.
Shares in BA, which have risen 27 percent in the last quarter, were 4.6 percent higher at 322.4 cents by 0848 GMT, valuing the group at around $4.1 billion.
BA said passenger revenue had fallen 13.6 percent, with a 3 percent drop in capacity, while yields – the revenue it makes on each passenger for every mile travelled – were down 12.2 percent.
However, it said both volumes and yields had “started to stabilize,” with analysts predicting the worst could now be over for BA.
“These results are a touch worse than expected but the tone is a little less pessimistic than before. That is consistent with the view that BA has reached the bottom of the downward cycle,” said Astaire analyst Douglas McNeill.
Walsh said conditions in the aviation market were still challenging, which is bad news for plane-makers Boeing and Airbus who are headed for their worst annual order tally in at least 15 years.
BA is expected to report a pretax loss of some $943 million for the year to the end of March, according to a recent Thomson Reuters I/B/E/S poll of 19 analysts.
Earlier this week Irish budget airline Ryanair reported an 80 percent increase in first-half net profits, while Scandinavian airline SAS reported a surprise third-quarter pretax profit of $16 million.
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